VZCZCXRO6410
OO RUEHBC RUEHDA RUEHDE RUEHDIR RUEHIHL RUEHKUK
DE RUEHKU #4309/01 3051431
ZNR UUUUU ZZH
O 011431Z NOV 06
FM AMEMBASSY KUWAIT
TO RUEHC/SECSTATE WASHDC IMMEDIATE 7415
INFO RUCNRAQ/IRAQ COLLECTIVE IMMEDIATE
RUEHZM/GULF COOPERATION COUNCIL COLLECTIVE IMMEDIATE
RUEATRS/DEPT OF TREASURY WASHDC IMMEDIATE

UNCLAS SECTION 01 OF 03 KUWAIT 004309 
 
SIPDIS 
 
SIPDIS 
SENSITIVE 
 
E.O. 12958: N/A 
TAGS: PGOV PREL EAID ECON EFIN ETRD EINV IZ KU
 
SUBJECT: INTERNATIONAL COMPACT WITH IRAQ: OCT 31 PG MEETING STRESSES 
PRIORITIZATION, NEXT STEPS 
 
¶1. (SBU) SUMMARY.  At the Oct. 31 meeting of the Preparatory Group 
(PG) for the International Compact with Iraq (ICI), the PG achieved 
broad consensus that the current iteration was satisfactory, and 
that critical next steps include reaching out to a broader range of 
countries for participation in the Compact process, and finalizing 
commitments with the aim of signing the ICI at the ministerial level 
within a month to six weeks.  Some PG members also raised defining 
priority areas and the implementation process.  Ranking members of 
the Iraqi Council of Representatives expressed their support for the 
ICI.  D/S Robert Kimmitt outlined planned USG commitments to the ICI 
and engaged Iraqi officials bilaterally on a range of issues 
including inflation, donor commitments, and Compact next steps.  END 
SUMMARY. 
 
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PG Meeting: Draft Accepted, Next Steps 
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¶2. (SBU) At the Oct. 31 meeting of the Preparatory Group for the 
International Compact with Iraq at the Kuwaiti Fund in Kuwait, the 
PG achieved broad consensus that the current iteration was 
satisfactory, and that, except for minor corrections, reopening the 
text to major revisions would be counter-productive.  Participating 
were delegations from the EU, EC, Italy, Germany, Spain, France, 
Japan, Korea, US, UK, World Bank, IMF, UN, Saudi Arabia, UAE, 
Islamic Development Bank, and a range of GOI officials, including 
DPM Barham Salih, Minister of Planning Ali Baban, and Central Bank 
Governer Sinan Shabibi.  Kuwait's Foreign Minister, Sheikh Mohammad 
al-Sabah, opened the session by emphasizing the need for the GOI to 
demonstrate leadership in the process, identify investment needs and 
an implementation mechanism, and reach out to donor countries to 
explain the ICI.  Throughout the day, several themes were discussed 
among PG members.  These are: 
 
¶3. (SBU) Political/Security Context:  The Japanese and Korean 
delegations further suggested including political/security 
benchmarks in the Joint Monitoring Matrix (JMM), although other 
delegations failed to support this suggestion, given the consensus 
that the draft Compact should not be re-opened for major revision. 
There was broad support for the notion that an improved security 
situation was fundamental for the success of the Compact. 
 
¶4. (SBU) Outreach:  Many delegations, including the EC, UK, EU, and 
World Bank, articulated the need to move the focus of the PG away 
from additional textual iterations of the Compact documents, and 
toward widening the circle of participation in the Compact process. 
DPM Salih, in closing remarks, confirmed this consensus, and he and 
UNDP assistant administrator Ad Melkert proposed a meeting at UNNY 
to include the group of countries from the Sept. 18 meeting to gain 
the widest possible participation.  Some participants, including UN 
DepSecGen Mark Malloch Brown, participating via DVC, emphasized the 
need to encourage smaller donors to engage in the Compact process. 
Brown and DPM Salih also stated the UN and GOI will undertake a 
"roadshow" with select PG members in the coming months, to visit 
capitals of potential donors and articulate the importance of their 
full participation in the Compact process.  Salih added a call for 
PG members' assistance in encouraging engagement by potential donor 
countries with which they may have influence, while stressing that 
visible GOI leadership in the effort is essential. 
 
¶4. (SBU) Implementation:  The World Bank, Canada, EU, and the EC 
agreed on the need for the PG to define before the final PG meeting 
the ICI implementation mechanism.  The EU also stressed the need for 
the implementation effort to be GOI-led. 
 
¶5. (SBU) Prioritization/Sequencing:  In light of the Compact draft 
having taken on substantial length during the drafting process, the 
EU, UK, EC and World Bank delegations emphasized the need to 
identify priorities and a plan for sequencing the many goals 
outlined in the Compact document, particularly in the JMM.  This 
call was echoed by Deputy Prime Minister Barham Salih and Minister 
for Planning Ali Baban, with Salih promising to undertake this 
effort in consultation with the World Bank and UN in the next few 
weeks.  Such prioritization, particularly if clearly articulated in 
the JMM, could play a useful role in refining the focus of the 
Compact document on key areas for Iraq's economic development.  As a 
part of the prioritization effort, the World Bank, the UN and other 
delegations stressed the need to identify "quick wins" that could 
provide short-term gains in the period immediately following the 
Compact signing. 
 
¶6. (SBU) IRFFI:  Canada, in their capacity as IRFFI chair, stressed 
the need for a "recalibration" of the organization to strengthen 
their points of contact with the ICI, and ensure IRFFI supports the 
priorities of the GOI, the World Bank, and the UN.  They stressed, 
however, the need to do so without changing the legal underpinnings 
of the organization.  Many delegations noted that IRFFI remains an 
effective tool for providing a framework for donor contributions, 
 
KUWAIT 00004309  002 OF 003 
 
 
including in the context of the Compact. 
 
¶7. (SBU) Mutual Commitments: Commitments for donor support 
articulated at the meeting include the following: EU: negotiating a 
trade treaty the GOI, debt relief under Paris Club terms, technical 
assistance, financial assistance though grants, community assistance 
programs, dialogues on energy and political issues, and bilateral 
assistance programs by EU member nations; Japan: financial 
contributions, though grants and soft loans (including $3.5 billion 
currently being implemented), debt relief, technical assistance, 
IRFFI contributions, infrastructure development in the energy 
sector, programs for basic human needs, governance and security; 
Korea: on-going programs for capacity building, education, 
vocational training, health, energy and electricity, debt 
forgiveness under Paris Club terms (totaling $2.8 billion), new 
funding this year under the ICI for $40 million, and programs for 
2008 are currently under discussion; Italy: interventions in all 
categories in paragraph 6.3 of the Compact draft, especially 
security-related technical assistance, training in a range of 
sectors, notably in antiquities, soft loans, and programs in 
infrastructure development; Islamic Development Bank: reaffirmation 
of previous agreements, particularly a $500 million package, of 
which $245 million are for energy and essential services projects 
and $50 million in free loans; Saudi Arabia: ID 200 million in 
grants for education.  The UK outlined general areas for targeted 
support, including economic management, the energy sector and 
support for reconciliation.  The EC delegation indicated general 
areas for support would include capacity-building, non-monetized 
support such as the EU trade agreement. Germany, France and Spain 
did not discuss commitments. 
 
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D/S Kimmitt Comments and USG Commitments 
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¶8. (SBU) In opening remarks, D/S Kimmitt, heading the USG 
delegation, stressed a need for clarification of priority actions in 
the immediate term.  He emphasized that the Iraqis have done all 
that has been asked of them in the Compact process so far in 
detailing reform commitments, and that now is the time for 
commitments from the international partners that will enable Iraq to 
meet its goals.  He also underscored the importance of the political 
signal a successful ICI process will send. 
 
¶9. (SBU) In remarks on Compact implementation and ways forward, D/S 
Kimmitt outlined five keys areas of additional planned and on-going 
US support: 1) full debt forgiveness, 2) technical assistance, 3) 
investment promotion activities, including OPIC and other programs, 
4) development assistance, and 5) security assistance, including a 
request for billions of dollars for support for Iraq's security 
forces, which would not only enhance security but would also free up 
funds for other uses.  Kimmitt pledged that more detail on these 
commitments would be presented at the ministerial meeting, which 
Secretary Rice would attend.  He pointed out the financing gap 
 
SIPDIS 
between Iraq's investment needs and the internal and external 
resources available to it, and noted that IRFFI provides experience 
and infrastructure in helping facilitate donor commitments, and 
urged the IFIs, especially those based in the Gulf region, to play 
an active role.  He also stressed the importance of improving the 
GOI's budget execution. 
 
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COR Participation 
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¶10. (SBU) Two committee chairmen at the Iraqi Council of 
Representatives participating in the PG meeting, expressing support 
for the Compact process.  Shaykh Humam Hamoudi, Chairman of the 
Foreign Relations Committee, applauded the draft of the ICI, and 
adding that the GOI will follow up to adopt the Compact and turn the 
pledges in the ICI into actual programs on the ground.  He also 
stressed the value of the Compact process in bringing donor 
countries such as Iran into the process, and that political and 
security reform must happen in parallel with the economic reforms 
outlined in the ICI. Haider al-Abadi, Chairman of the Economic 
Committee, stated that the COR has committed itself to national 
development, and applauded the ICI as a mechanism for working toward 
that goal.  He pointed to the draft Investment Law as a 
demonstration of the COR's commitment to economic reform and an open 
economy.  He noted, however, that the COR faces a challenging 
schedule of legislative priorities, and that the body is "learning 
as we go." 
 
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Additional GOI Comments 
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¶11. (SBU) In his remarks to the PG, Ali Baban, Minister of Planning 
 
KUWAIT 00004309  003 OF 003 
 
 
and Development Cooperation (MOPDC), Baban highlighted Iraq's 
efforts to prioritize and organize itself to handle the challenges 
presented by the Compact.  He said that broadly speaking the 
guidelines of his agency were to align Iraq' budgets and development 
efforts with the National Development Strategy, Iraq's "grand plan" 
for achieving its "national vision."  The immediate challenge is to 
plan for how best to invest the planned-for 70% increase in Iraq's 
2007 capital budget.  His priorities for deciding where the funds 
should go relate to pressing needs to address unemployment and 
underemployment, as well as problems for the environment and desires 
to encourage the private sector, focused on three sectors: 
agriculture, industry and banking.  He also stressed the difficult 
political and security situation in Iraq and that beginning to show 
progress on the economic front will be part of the solution. 
 
Deputy Secretary Kimmitt cleared this cable. 
 
 
LEBARON